Oil prices are on pace for their worst month since March 2020, dropping 21% as Gulf supply returns faster than expected and China's demand weakens. West Texas Intermediate fell to around $69 a barrel on Friday, extending a selloff that has unwound most of the Strait of Hormuz spike. The market has shifted from pricing scarcity to anticipating a glut, with Dubai prompt timespreads flipping into contango, signaling expected oversupply.

Gulf Supply Returns Faster Than Expected

Total Persian Gulf exports have climbed back to 63% of normal levels on a seven-day basis, according to Goldman Sachs commodities research led by Yulia Zhestkova Grigsby. There have been no reported attacks on shipping near the Strait of Hormuz since June 11. The U.S. Treasury has issued a 60-day waiver authorizing Iranian oil sales, which Goldman estimates could unlock as much as 60 million barrels of Iranian crude already sitting on water.

China Weakens Demand Story

Chinese crude imports fell to 4.6 million barrels per day in May, weighed down by rapid EV adoption, a prolonged property downturn, slower economic growth and elevated inventories. According to JPMorgan, China accounts for roughly 74% of the recent decline in global crude imports. This structural demand slowdown has prevented oil from fully reflecting geopolitical risks around the Strait of Hormuz.

Geopolitical Premium Disappears

Goldman Sachs indicated investors are questioning whether crude deserves the geopolitical premium it has carried since the conflict began. The speed of export recovery and the market's ability to reroute supply while demand adjusts have challenged assumptions about permanently elevated security risks. Lower oil prices could reduce bunker fuel costs, ease freight rates and relieve supply-chain pressures, while also helping to moderate fertilizer prices and broader inflationary pressures over the coming months, according to Oxford Economics.

Saudi Arabia has resumed crude loadings at the Ras Tanura terminal after a nearly four-month halt, marking a significant shift in regional energy supply activity. The restart aligns with a broader trend of increasing oil flows across the Gulf region, reinforcing the facility's critical role in global energy markets. Ras Tanura, located on the eastern coast of Saudi Arabia, is one of the world's largest oil export terminals and a key hub for Saudi Arabian crude shipments.

Ras Tanura Export Operations

The resumption of operations at Ras Tanura follows a period of inactivity lasting nearly four months. The terminal is integral to Saudi Arabia's oil export infrastructure, and its return to full service is expected to contribute to the rising volume of oil flows in the Gulf region.

Regional Energy Flow Context

The increase in Gulf oil flows provides the broader backdrop for the Ras Tanura restart. The Gulf region remains a critical corridor for global oil supply, and changes in export activity from major terminals like Ras Tanura have significant implications for energy markets. The reported rise in flows suggests a ramping up of supply activity from key producers in the region.